Abstract
We examine market value implications of managing liquidity via supplier financing. Results suggest a direct relation between shareholder wealth and use of trade credit. Further, the relation exhibits significant cross-sectional variation. In particular, industry affiliation influences the market value of trade credit, with respect to liquidity of goods sold and product market competition. Results also suggest the excess returns-supplier financing association strengthens with financial constraint, which supports the financing motive for trade credit. Findings also provide some support for the transactions cost motive. Overall, we conclude that shareholders acknowledge the strategic benefits associated with access to and use of supplier financing and that downstream firms’ characteristics influence from the value relevance of the strategic use of trade credit.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
